Negative Sentiment Suggests We are Near a Bottom
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If you are a believer in the contrarian school of investing, picking tops and bottoms involves looking for signs of too much optimism and too much pessimism, respectively.
Considering this week's AAII Investor Sentiment Survey, the bell may have just rung for a bottom.
A popular tool for contrarians to use in their analysis, the Survey measures the percentage of individual investors who are bullish, bearish, or neutral on the stock market for the next six months.
The latest weekly reading from AAII shows those bullish on the market is 24.4 percent, down 5.8 percent from the prior week, while those bearish on the market is at 47.7 percent, up 14.2 percent from the prior week.
The bearish reading is now at the highest rate since August 2010. That August reading was followed by a major market rally.
The bearish reading hit an all time high of 70.27 percent in March 2009, just before the current market bottom.
In addition to investor polls, mainstream polls are also showing a major surge in negative sentiment. A recent CNN poll showed 48 percent of U.S. citizens think there will be another Great Depression in the next year, the highest reading ever reached for the poll.
As a contrarian, when you see these type of signs, you can start putting on your bull suit.
Considering this week's AAII Investor Sentiment Survey, the bell may have just rung for a bottom.
A popular tool for contrarians to use in their analysis, the Survey measures the percentage of individual investors who are bullish, bearish, or neutral on the stock market for the next six months.
The latest weekly reading from AAII shows those bullish on the market is 24.4 percent, down 5.8 percent from the prior week, while those bearish on the market is at 47.7 percent, up 14.2 percent from the prior week.
The bearish reading is now at the highest rate since August 2010. That August reading was followed by a major market rally.
The bearish reading hit an all time high of 70.27 percent in March 2009, just before the current market bottom.
In addition to investor polls, mainstream polls are also showing a major surge in negative sentiment. A recent CNN poll showed 48 percent of U.S. citizens think there will be another Great Depression in the next year, the highest reading ever reached for the poll.
As a contrarian, when you see these type of signs, you can start putting on your bull suit.
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